Singapore cryptocurrencies

Singapore warns of risks of cryptocurrency investing

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The Monetary Authority of Singapore (MAS) warned against cryptocurrencies on Tuesday (Nov. 9), saying retail investors in these tokens are at risk of suffering “significant losses.”

“The prices of crypto tokens are not anchored on any economic fundamentals, and are subject to sharp speculative swings,” Ravi Menon, managing director of the MAS said at the Singapore Fintech Festival which runs through Friday (Nov. 12). He added that the central bank of Singapore “frowns on cryptocurrencies or tokens as an investment asset for retail investors.”

The crypto assets space is constantly evolving and countries around the world are grappling with how to regulate them. Meanwhile, central banks most notably in China and the United States, are actively considering whether to adopt or create their own Central Bank Digital Currency (CBDC). Nigeria last month launched the eNaira. And El Salvador has embraced Bitcoin as legal tender.

According to Menon, Singapore is not close to joining that list. “The case for a retail CBDC in Singapore is not urgent,” he said. He argued that physical cash is still very much in use,
a high proportion of Singaporeans have bank accounts, while digital payments in the city-state are efficient and competitive.

“Retail CBDCs can potentially pose significant risks to monetary and financial stability … if people held a significant portion of their deposits in the form of digital Singapore dollars with MAS, it would considerably reduce our banks’ capacity to make loans” Menon noted.

MAS which regulates banks and financial firms, also acknowledged that there are potential benefits.

Overall, the small island nation, has taken a pro-active and largely positive stance toward the burgeoning digital asset class, attracting crypto firms from Binance Holdings Ltd-the world’s largest crypto exchange by trading volume -to crypto exchange and custodian firm Gemini – to set up offices there.

Last year, MAS enforced a crypto-related legislation to regulate digital token-based payments under its Payment Services Act. The regulation obliges the cryptocurrency exchanges and digital token payment systems to be licensed. It also saves the users and safeguards the government against money laundering and terrorist financing dangers.

The fast-growing digital asset industry is currently valued at $3 trillion, as the world’s two largest cryptocurrencies surged to record highs. Bitcoin, the world’s most popular cryptocurrency, hit an all-time high of $68,530.34 early Tuesday, according to CoinMarketCap with some investors predicting even bigger gains. Ether, the token supporting the Ethereum blockchain, gained 3.5% to hit $4,789.45 at 11:32 a.m. Hong Kong time.